Trends in economic growth in metro areas provides insight

We have blogged before about the economic trends in rural areas during and after the Great Recession (here, here, and here), but The Atlantic Cities provides an analysis of the trends in metropolitan areas that is worth a look. Richard Florida summarizes research that shows how the country’s 350 metro areas grew in the 2000’s and in the post-crisis period between 2008 and 2010.

While the overall U.S. economy grew at a rate of 1.46 percent between 2001-2010, metro areas overall grew slightly faster, at a rate of 1.63 percent. As Florida points out, “high-tech knowledge economy centers” had the most significant growth among the largest metro areas, including the Raleigh-Cary metro area that had an average annual change in gross domestic product (GDP) of 3.25 percent. The map below show the growth of these cities, with the green dots signifying growth and red dots indicating declines.

He also points out, however, that overall the largest growth occurred in smaller metro areas, including Durham-Chapel Hill, which had a 5.36 percent growth rate.

But when you zoom into the post-crisis years of 2008 to 2010, there are far more metro areas that experienced declines. The overall U.S. GDP decreased by 0.32 percent, while metro areas, though they fared better, still experienced a decrease of 0.002 percent. Still, some large metro areas posted growth. Raleigh-Cary came in sixth out of the top 10 largest metro areas, with a growth rate of 2.14 percent. And overall, the smaller metro areas also posted higher economic growth, including Durham-Chapel Hill at 3.7 percent.

What can we take away from these trends? As Florida puts it:

It’s time to recognize that the U.S. economy is not only made up of industries which grow and decline at different rates, but hundreds of metro regions that do so as well. There is a great deal national economic policy makers can gain from studying the factors that underpin the metros with more consistent and resilient growth.

With knowledge-based and resource-rich economies, as well as smaller college-towns recording persistent positive growth even during the recession, it would be instructive to investigate what kept these economies afloat.

The data on the geography of economic growth we have compiled here suggests that two kinds of metros have shown more consistent growth over the past decade — those with god-given endowments of natural resources and those with man-made endowments of knowledge resources (economists consistently note the key role of human capital in economic progress).

Florida concludes that these trends indicate that economic policy should thus focus less on housing, roads and other infrastructure that he refers to as “physical capital,” and more on the “accumulation of human capital and knowledge assets.” While this is true to a certain extent, it might not be as simple as swapping one for the other. Both of these kinds of assets should be developed at the same time. In any case, as we posted about yesterday, the landscape of economic growth has been uneven, creating inequities even within these areas of high growth. Whether it is developing a knowledge base or investing in infrastructure any strategy must take into account how the area’s most marginalized communities will participate, and whether these strategies will create an equality of opportunity for all citizens to prosper.